Swiss risk EU anger after dodging EU treaty deadline

ZURICH/BRUSSELS (Reuters) - The Swiss government will consult domestic power brokers on a draft treaty setting out ties with the European Union, it said on Friday, ignoring an ultimatum from Switzerland’s biggest trading partner to sign off now or face punishment.

Swiss State Secretary Roberto Balzaretti, head of the Directorate for European Affairs (DEA), attends a news conference on Swiss-EU relations in Bern, Switzerland, December 7, 2018. REUTERS/Denis Balibouse

Swiss officials said that much of the draft - demanded by Brussels for a decade and negotiated over more than four years - was in Swiss interests, but the Swiss side would refrain from endorsing the pact for now given differences that remain.

The European Commission, which had set Friday as a deadline, issued a statement to call for a quick approval of the draft treaty and set Dec. 11 as the date that the executive will decide what next steps to take on Switzerland’s access to EU markets for its stock exchanges.

EU sources have said Brussels will ban EU-based banks and brokers from trading on Swiss stock exchanges from 2019 as a punitive measure should Bern not clearly back the deal. That would prompt Swiss retaliation.

“The European Commission respects the wish of the Federal Council to consult all stakeholders,” the Commission said in its statement, but added that it expects “the consultation to be swift and hope that its outcome will be positive”.

It said the draft treaty was the best deal possible.

The talks are complicated by Britain’s negotiations on its EU divorce terms, with the Commission loath to be soft on the Swiss for fear of providing ammunition to Brexiteers.

Some Swiss also want to see what Britain can negotiate for itself before striking Bern’s own EU deal. Britain’s parliament will vote on a draft EU withdrawal treaty on Dec. 11.

For Switzerland, disagreements with the EU include Swiss rules that defend high wages from cross-border skilled labor and the rights of EU workers to Swiss social benefits.

It would revisit the subject in spring 2019 after political consultations over the draft it published on Friday. The government said the exercise would help it analyze whether signing the pact would be in the national interest.

“All paths are open from a complete yes to a complete no,” Foreign Minister Ignazio Cassis told a news conference in Bern.

The draft treaty would have the Swiss routinely adopt EU single market rules and provide a more effective system for resolving disputes. The EU has also sought to water down Swiss labor rules protecting high local wages, angering unions.

SOVEREIGNTY ISSUES

Both the traditionally pro-Europe left and the anti-EU far right say the deal infringes too much on Swiss sovereignty, leaving the four-party coalition that makes up the government short of a majority to approve it before elections next year.

Swiss labor has fought tooth and nail against EU efforts to dilute Swiss labor rules, and the main union federation seized on texts published on Friday to rail against the proposed deal.

“The elements of the framework agreement with the EU presented by the government confirm the Swiss Confederation of Trade Unions’ worst fears,” it said.

Swiss President Alain Berset said he broke Friday’s news to European Commission President Jean-Claude Juncker in a “friendly” telephone call, but gave no details of the conversation.

Swiss-EU relations suffered in 1992 when Swiss voters rejected joining the European Economic Area. This led to a negotiated patchwork of 120 bilateral accords that now govern ties.

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The treaty in question would sit atop those accords and focus on five areas: free movement of people, aviation, land transport, mutual recognition of industrial standards and processed farm goods.

If talks fail, the sectoral accords would stay in effect but relations would suffer badly. No deal would mean no increase in Swiss access to the single market, dashing hopes for a new electricity union. It could also endanger unfettered EU market access for Swiss makers of products such as medical devices.